EP301 | Why 51% of Subscribers Cancel Each Year—and How to Reduce Voluntary Churn

Hey there, today's episode is brought to you by Vitaly. Vitaly is redefining customer success with Vitaly AI, your purpose built AI co-pilot for CS. It helps team summarize customer conversations instantly, generate action plans, and automate the busy work so you can focus on driving outcomes, not chasing data. They're also currently giving away a free pair of airports to all Trinifim listeners when you take a qualified demo with them. So if you're in the market for a CS platform, visit vitaly.io/trinifim today to schedule your demo and get your airports. That's bi-t-al-y.io/churnfm. If you decide to check them out, please make sure to use the links quoted as it allows them to measure the ROI of this campaign and helps me retain them as our sponsors to continue producing Trinifim as an independent creator. Don't treat Trin as goodbye. Those subscribers are still yours to win back if you put your heart in mind to it. How do you go to have a phone and product? You didn't make Trinifim. You saw these these days. You've just gone for revenue in the door. This is Trinifim, the podcast for subscription economy pros. Each week we hear how the world's fastest growing companies are tackling Trin from using retention to fuel their growth. How do you build a habit for a new product? We cross over that magic threshold to negative Trinifim. If you need to invest in customer success, it always comes down to retention and engagement. Completely bootstrap, profitable and growing. Strategies, tactics and ideas brought together to help your business thrive in the subscription economy. I'm your host Andrew Michael, and here's today's episode. Hey, Priya, welcome to the show. Thank you so much, Andrew. I'm excited to be here. It's great to have you. For the listeners, Priya is the CPO of Recurly, empowering brands to launch scale and optimize subscription experiences that turn customers into loyal communities. They're trusted by innovators like Twitch, Boxbox, Sprout, Social, Pop Drive and more. Prior to Recurly, Priya was the VP of Product Management, Growth Management, and Sajjan Riss at Bricks. And a director of Product Management at both Facebook and Commerce and Paypal. So Priya is also an advisor for Foundation Capital. My first question for you today, Priya, what is Kipchya in the FinTech space throughout your career? I think moving money moves the world. And there's a lot of innovation still to be had, believe it or not, even after multiple decades of innovation and growth in FinTech. And so I've sort of enjoyed that opportunity to try new things even within that space each time I make the move. So that's what has kept me here. Yeah. Who's a motto as moving money moves the world? Is it any one of the previous companies? It sounds like a brand slogan, no. I just came up with it. You just came up with it. Yeah, it sounded like a PayPal thing or something like that. But very nice. And so you joined Recurly about a year and a half ago now. What's the experience being like? What are some of the challenges like you've been excited about tackling since joining? Yeah, Recurly has been around since 2009. They are a well-known brand in the subscription economy. The exciting part for me over the last year and a half was how do we move what we are already building for our merchants helping them grow with their subscribers into a more agentic future where we can set subscription growth on autopilot for our merchants, particularly given the current environment of more fiscal responsibility. So that's been an exciting shift for me, like how do we move into this AI era as a company that was built in 2009? Yeah, I think specifically in the payment space, this is one of the biggest areas where things are evolving quite fast. I think entire models are shifting and changing. I think the traditional source models moving more towards usage-based pricing model. I think there's a whole bunch of shifts and changes, which I think a lot of that is actually what we're chatting about today. I think regularly comes out with a state of subscriptions and the 2026 report would have been released by the time the seposa comes out. So we're getting a sneak peek, but it might be a little bit late on that. But it's hard to chat through about that today as well. Maybe just going on there. What has been one of your most interesting findings so far with way things are changing when it comes to subscriptions and payments and with this new AI boom? Is there anything that's really stood out to you? So I wouldn't have expected that, but it makes sense now that it's happening. I think just customers or subscribers acceptance of subscriptions managed through AI, our AI usage has definitely drastically improved, particularly given all of the consumer adoption of large language models through chat GPT, Gemini, et cetera. And so we are envisioning a future where AI recommendations can directly go into a subscriber merchant interaction experience that can then make it easy for the subscribers intent to come through. So in our state of subscriptions report, which is an annual data driven industry report that we publish that serves as benchmarks for the subscription economy. One of the key findings we found is that the pause, where previously merchants used to think of pauses, hey, that's churn, I need to prevent it. But it's more of a tool in their tools set now where subscribers are expecting that pause and those actions can be intelligently offered at the right moments. If there's not enough engagement, for example, you can proactively offer a pause so that it doesn't result in a cancel. So there are various ways in which we can apply the new set of actions based on insights and data that we have. Yeah, I think it's very interesting as well, specifically, around the usage base pricing. And now, if we think a lot of the prosumer market, I think we're some of these LLL models are operating within, is that there is a lot of periodic use now of software, whereas in the past, we used to try to sell this ongoing nature. Now it's really about what are the results being delivered, and you don't always need those results. And so it makes sense that you would see a lot more of this activity happening with people wanting to pause and then come back when the time is right. And something we face, I think at Hot Jar, we notice a lot of reactivation, and at some point, like became a significant portion of the business was the reactivation revenue, just due to this periodic nature of people pausing and coming back. And are you seeing anything interesting that customers are doing now to really focus on re-engaging that audience to be able to reactivate and bring back those pause customers? Like, what are some of the interesting things you're seeing customers explore in the space? Yeah, I think previously it used to be all about acquisition, but we're definitely seeing a lot more focus on retention and retention strategies through engagement. Rikoli also has a product or Rikoli engaged that specifically helps with that. The thing that we see there is how do you understand subscriber behavior on your app? What are they trying to do? And provide timely engagement experiences that then allows you to retain them. So one example is, as they are moving to cancel, you can understand their lifetime value and say, OK, this subscriber likely will go hit cancel right now. Maybe I preempt that action with what we call a prompt. Just prompt them in the right moment to say, hey, if I give you 50% off, you can stay on for an additional three months, six months, et cetera. That will then help them retain on the platform. The other trend we are seeing is also one of micro subscriptions, if you will. So we can pass this to a game or for a very short period of time, help them understand the benefit of the platform. So they can then subscribe to longer term plans once they see the value. I mean, even our family, right? Like we have a Tesla. We, FSD prompts keep coming up. Hey, do you want to try FSD? I think this weekend and once my husband tried it, he's now never going back. We are paying that monthly subscription. So I think those are interesting ways to get subscribers introduced to new offerings and then drive the engagement from that and then help retain or grow or expand with existing subscriber base. Yeah, I think that is very interesting. I think like actually I was looking yesterday at Tesla and I'm going to go back to my search because I also was looking for a new car. And I think unfortunately though, we don't have FSD and Cypress. But the thing that you mentioned now, I think makes a lot of sense in the context of ANR specifically as well because previously in the past, like the costs to offer free trials were relatively low and minimal. But now we're, since we've introduced the LLMs and there's this like direct cost associated with delivering the service, which is exponentially more than it was in the past, it's become restrictive now to be able to actually give that free trial and then offering. And so what are some of the interesting ways you're seeing people create these trial experiences? So like you say, in Tesla's case now, this is popping up, try things out for the weekend, assuming that's also a page trial is the paid trial for the FSD. Yeah, I mean, it's like FSD, no, it's a free trial. Like, try it and then you can then subscribe to the monthly. But we are also seeing, for example, Amazon Prime has a pay-per-view, right? You could see a particular show on a specific channel that you want by pay-per-view for that show. If you enjoy it, then you can buy one episode and then you can then expand further. There are interesting models that come up like that. And healthcare subscriptions have seen substantial growth over the last year on our platform. And we see those models apply there as well. You're not sure if a particular supplement is going to work for you. You don't want to sign up for an annual plan in that case. You want to start with a smaller micro-subscription, see how that goes, and then have the opportunity to then grow into a more longer term plan. So those are all things that merchants are thinking of right now, specifically in particular industries. Digital media and entertainment, for example, is right for, is already saturated with so many different channels and so that's one area where just offering a micro-subscription can help retain subscribers more active. Yeah, I think things are evolving again as I said in this. I think one of the things I've also noticed, like there's this commentary on LinkedIn and like I'm not sure I buy it into it yet myself, but there's this idea that we've seen this rapid growth for AI startups and then everybody will start to challenge what churn and retention looks like on the back end. So they grow the harder they fall, whatever it is. I see many people commenting on this. And I think like, what are you seeing actually in reality in the data as well? Like these hyper growth startups that we haven't seen in the past? Are you seeing like extraordinary levels of churn? Or is this just something that is chatter on LinkedIn that people don't really have a good settle point on yet? Because nobody, it's way way too early still to like come out with the concrete data. [SOUND] I just wanted to give a quick reminder that our sponsor of this episode today is Vitaly. And they're giving away a free pair of AirPods to all qualified demos. So if you're in the market for a new CS platform, make sure to visit vitally.io/churnifm today and let them know I sent you. Now back to the episode. Yeah, I think what we're seeing is, subscribers have a mental limit on the number of subscriptions, overall number of subscriptions that they want to use. And so we've seen that like 51% of subscribers canceled at least one subscription in the last 12 months. So given that, yes, churn is a significant problem. But that's where if you showcase value and you consistently engage them with based on the prior usage, and net new functionality that you want to offer, we're seeing that windback campaigns are able to retain them. So in the AI world, definitely like there are many, you know, look alike services that come up. So the important thing is how do you differentiate yourself in order to both retain and then back that becomes important. Yeah, and I think more so now is all that it's become so cheap to build things and the number of competitors is like exponentially growing now because anybody who's previously like a peer more designer. You made it. Exactly. They can just start to generate like I think, I mean sales agencies, one thing like mine box now, like I used to read some of it. Now I've just given up on it. So I just scan for keywords. I used to try like programmers often replying to everybody that reached out like now there's actually zero chance like that's happening anymore. And so I think this is happening though across all sectors of software and many different spaces. And I think one of the things you have in the study is talking a little bit about like the top factors that are motivating loyalty because I think loyalty is going to be really important and key thing for people to start thinking about like when there can be a bundt of competitors like what's really going to make you stand out because it's almost no longer really going to be the software. To some extent, you can maybe argue that the UX is going to make a difference. But I think that like edge will slowly erode as well. So what are some of the things you found within the study that you found interesting when it came to like driving customality and motivating? Yeah, I think the key things that we found were around transparency and very clear building practices not being surprised later. You signed up for paying X but you find out that everything said and done, you're paying X plus Y. That definitely turned subscribers off. Having personalized content, personalized engagement that drives loyalty, ease of cancellation actually drives loyalty. Particularly because subscribers are now actively managing the total dollar spent on overall subscriptions. And so if you provide a way to easily pause or cancel, then that subscriber is going to come back over the long term versus if you make it so difficult that then they're like, I need to find a way to get out of this. So yeah, those are some top three things that come to mind. Yeah, I think it's no surprise. I think in terms of like transparency, I think that with transparency comes trust. And I think that trust, I think, is going to be critical elements that people need to know. OK, like I can trust this business. They're going to be around. They're going to be the ones that are going to be able to deliver the service because I think if there's just new competitors topping every day, you don't really have a good sense in understanding of who is actually legit, who's going to be there. So any business you can see that's really following best practices when it comes to transparency, ethical, and that will stand out and have an edge in the markets. Nice. And then you mentioned already, but it was a 50% of consumers have canceled the subscription within the last 12 months. So we like 1 to 2. These tend to be lower priced subscriptions as well. So I'm wondering how much difference did you see in the data when it comes to the price of the product? And then if reasons change as a result of that. So in the study, you have a generic reasons for cancellation in the last 12 months. And I think the top point I was not using it enough. Do you see this consistent across the price of these products or with any variances with a really cheap pro-sumer price versus high end subscription, maybe a B2B sourced company we'll be doing? Yeah, this is predominantly in direct to consumer price range between anywhere between $5 and 1999. That's where we predominantly see this behavior. And I think this presents a very clear opportunity for businesses to improve early engagement for subscriptions within this price point and personalize some value delivery and then drive some usage based retention programs. So you see somebody sign up first three months, not much activity, then you want to put some either offers in front of them or some way they can engage with your product better. And that would then drive the retention versus an early cancellation. Yeah, absolutely. The one thing I found interesting going through the data itself as well was the average monthly customer turn rates. It's actually on the page 16, I think, of the 50 other ports you ever quote, there is all looking at it now, is that education customer turn rate decreased for education businesses, which I found that at least in my mental model a little bit counterintuitive, considering that knowledge abundance now with Chatty Video Likes and seeing a lot of the education based publicly traded companies really taking a big hit in the market. Why do you think this is happening where this is decreasing for education? Across the board there's a couple of other ones, like digital media and entertainment decreased slightly. But on aggregate, I think the only space where we've seen an increased really is healthcare. And I would have expected to see more turn across the board rather than like less just you to the, obviously, no number of players entering the most space and then more abundance and choice. But maybe first one, why do you think education specifically? Because that's only one that's really had like a decent level in reduction and I agree. Yeah, I'd went down from 6.1 to 5.7%. I think the reason could be that the tech companies are figuring out added value on top of just basic prompting and respond where it's also validated content. Like if you're providing a subject matter expert who's delivering content versus you're not sure if the AI is hallucinating or response back to you. I think that might be driving this reduction as well. That's just my guess, honestly. We might have to dig further into the data to understand specifically which education, sector companies and what kind of programs are offers they have. For sure. What was the most surprising thing that came out to study for you specifically? Was anything that you read in your life? That's surprising. Yeah, I think the most surprising thing is the normal notion is that churn is bad. But what I think would be a good takeaway from this is selective churn, it reflects stronger consumer intent and not fatigue. And so customers or merchants should use this as an opportunity to provide the EC cancellation, the pause, all of the earlier aspects that we spoke about and not think of churn as goodbye. - Top of mind. Yeah, I think it's well like I feel as a consumer. This is true to me as well. As well as like I've started to use maybe more services. I tend to like cancel the service but I'm much more willing to go back to them as well when and as needed. So I can see and I see that as a pattern amongst like colleagues and friends as well. So I think that's going to be like definitely an interesting challenge and space for people to figure out next is like, how do you handle this periodic nature and how do we like still retain relationships or maybe not retain business these consumers and customers going forward? - And the pattern we saw also is that, you know, churn rate might increase maybe during the holiday period, October through December, people are, you know, they want holiday, if spending money, so they're trying to cut back on something else. But then it actually picks up back in, you know, February through April. So that's the time when you should be moving forward with retention programs or engagement programs or been back campaigns knowing that this periodic cycle is a pattern. - Is a pattern, yeah. No, I think that is interesting. I think it's also like you have more time with the end of the year to actually reflect and say, hey, like why am I spending all this money? I'll be here. I have too many of those. The other thing I think was interesting that going through it was the just taking a look at the transactions by payment method and how much they differed when it came to EU versus US. I think the biggest thing that for me stood out was like, Amir is much more prevalent PayPal than the US was and I wouldn't have expected that. Like I thought I would have been the opposite. Like knowing your background, like why do you think that is? Like why do you think PayPal is so much more prevalent in European Middle East as opposed to the US? - We've definitely seen higher adoption of alternate payment methods, like PayPal in Amir. I think PayPal represents trust, right? So it's a very, very high trust brand. You look at that orange button, you don't think about, you know, you're going to get defrauded or your credit card information is going to get stolen. So I think that sort of expands further into how subscribers maybe think in the European market, like they want, you know, high trust, they engage more with high trust brands and in the US market, credit card has been high trust in subscribers' mind by default. Just the usage of credit card has been so, so prevalent that constitutes high trust. But I think in Amir, debit has always been number one and then apart from that PayPal, I think it's due to the trust factor. - Class, yeah. I think the US also have like a much more robust like credit card reward system. When we have it here, the concept here in Amir, but it's not like as relevant where like people live to get credit points and things in the US. - The other factor could also be that that what can be offered in the US because there's interchange fees in the US, whereas, you know, the interchange fees are like very minimal in the US. - Yeah, the other thing is already getting it, which was stood out to me was that there's a higher relevance if I read it correctly of alternative payments such as like Apple Pay and PayPal in Amir, but they tend to be good for initial transactions, but then they carry like a higher renewal decline risk. Like, could you speak to that a little bit? Like, why would something like an Apple Pay or PayPal have a higher risk of decline over a credit card? - Yeah, I think with Apple Pay and PayPal, the reason might be that, you know, if you use in the background switch, these are wallets, right? So you could have multiple cards in those wallets. If you switch from a default card, you know, one that you used initially for the initial signup transaction, and then your wallet default card is switched. Maybe that has sufficient funds. Then there's a higher chance of decline, whereas if you have put down a particular credit card that then continues into the renewal transactions on the credit card side, then there's a higher chance that the authorization will go through because it has been already authored for that amount earlier on. So, you know, that could be one of the reasons why the renewal declines. Just because, you know, those are wallets and the payment methods in the wallets can get added removed, and then maybe that's not the right one for that particular subscription renewal. - Yeah, it's interesting because you might like, like run an experiment, let's like, let's introduce PayPal to see if we increase conversions. Great success, but we're not even realizing you're really impacting general attention on the other end, and that's something you'd only see, like whether it's 30 days or 12 months from then, but having access to some information like this. - Yeah, yeah, this is where products like Ecclei then come in handy quite a bit because then we have the right retry mechanisms, we understand, okay. We can try a different payment method within that wallet. We can try other payment methods that the subscriber might have walleted with us. So, different times of day, various ways that we could try the retries, as well as we have, you know, Dunding campaigns where it's a follow-up process, update a payment method, maybe the subscriber could then at the time then go back into the PayPal wallet and make sure the right payment method is the default one. So, those are all options that Rikoli does in the background for our merchants, so they don't have to worry about leaving money on the table. - Yeah, I was going through it. I think that's like most of the points that you hit on on the next slide in the report. So, I think from like Rikoli standpoint, well positioned obviously to help solve some of these challenges, telling us what to do and not some of that. I think like it's one of those products as well that not only are you going to solve like underlying causes for general attention in your business, but will like solve all the longing for each the stuff that you shouldn't even have to worry about to begin with like the involuntary churn that's happening that can have really big impacts really fast is all introducing something like that. - And for voluntary churn, we introduced a new product this year called Rikoli Engage. That's where it can help you with the cancel save flows. Just bringing the right intervention at the right time to your subscribers. - Cool, and then the other, maybe last one to just show on nothing before I dive into because it's even an hour and time is that another interesting thing that came up was that 78% of merchants are now offering a monthly annual plan. But again, this is like maybe one of those things where the service level looks great, but then what's also being seen on the other side is the renewal rate was dropped from 82%, to 23%, 82%, 93%, 23. So that's quite a significant drop on annual renewals. Like what do you think is driving that? Like I think I can have a lot of different assumptions of why this is happening, but maybe you have more context from the data behind it. - I would say that having both plans is an absolute must, so that you can bring in subscribers who are of the mentality of try before you buy or shorter term and then see the value and then expand to long term. The annual subscription, the renewal moment definitely is a point of turn, right? And merchants should understand that and that's when they have to really highlight the value that you've derived from it over the last year or so and why continuing to stay on is important and that's the moment where they can craft the right offers to keep the subscriber on the platform. I would say given that it's a point of turn, this is where offering downgrade paths is going to be important, where instead of saying, hey, renew for another full 12 months based on their engagement and usage pattern of the service, you could say, hey, we see that you have been actually used as much and this is where transparency and being straight with your subscriber can really help. You might actually want to try this smaller plan. I think those types of offers could really help at that renewal moment. - Yeah, I think I've seen some other brands where they actually end up like canceling subscriptions for their customers, hey, you've not been using this, like here's your money back even to some degree and that's almost like in other people saying, why do you need my money? I don't want my money back, like, just take my money. - Yeah. - But actually, I really don't want to make a correction as well that it's not, didn't drop from maybe 2% to 23%, but it's just the rate has dropped to 82.9% and your own annual on aggregate with only 23% of failed renewals recovered. So it's becoming harder, but it's bad as I thought it was. - Yeah. - And my mind I think is what, because I think there are like a lot of services as well now where they're offering really competitive deals to switch to yearly, but then as well, a lot of people may be technical deals, but then realizing, okay, like, just not using a service anymore and there isn't new service and so and with more competition, I think that could lead to the reason. Anyway, what's one thing that you know today about churn and attention that you wish in you when you got started with your career? - I think I touched on this earlier, which is don't treat churn as goodbye. Those subscribers are still yours to win back if you put your heart and mind to it. - Yes. And then a question maybe because you've obviously been in the payment space for a long time now, you've probably advised a lot of different startups on their stack and process. Like what's one question that you wish more people would consider asking when it came to payments, but they don't. - I think when merchants want to think about, okay, what's the payment stack I want to use? It's not only about, I mean, of course, everybody's thinking of how much is going to cost me and authorization rates, you know, payments performance, et cetera. I think an important thing to also think about is what kind of partnership you get from that payment service provider? Are they going to be your thought partner in designing the offering the right way with you and how do they play well with other vendors and partners in the ecosystem such as fraud providers, chargeback providers, et cetera? - Nice. You should always be considering as well, not just the cost, but how you can actually collaborate and work together with the provider. - Like a better, together, the evolution for the merchant overall. - To figure it out. So we are up on time. Before we drop off today, the first one say, thank you very much, it's been really interesting to chat through some of the stakes here and I'm sure the audience like us, we will leave these in the show notes, hopefully by the time the set, the side is you'll be able to check it out there directly. Isn't it final thoughts you want to leave us with today before we drop off? - I just want to say that, you know, first of all, thank you for having me. This has been an interesting conversation for me as well. The state of subscription revolt, it just acts as a benchmark. So I hope all your listeners derive a lot of value from the analysis that we put forth there. We also included a checklist at the end. So if you are a director consumer brand looking to, you know, drive, turn down our attention up and drive growth for your business, then there are specific things that you could check for across different categories. So I hope that the listeners will use that as well. - Amazing. I get it now, we'll make sure to leave that in the show notes as well. But thanks again for joining me. I really, really appreciate the time and wish you best of luck going forward. - Thank you so much, Andrew. Thank you for having me. And that's a wrap for the show today with me and RemiKl. I really hope you enjoyed it and you're able to pull out something valuable for your business. To keep up to date with churn.fm and be notified about new episodes, blog posts and more, subscribe to our mailing list by visiting churn.fm. Also, don't forget to subscribe to our show on iTunes, Google Play or wherever you listen to your podcasts. If you have any feedback, good or bad, I would love to hear from you and you can provide your blunt, direct feedback by sending it to Andrew at churn.fm. Lastly, but most importantly, if you enjoyed this episode, please share it and leave a review as it really helps get the word out and grow the community. Thanks again for listening. See you again next week. And with that, just wanna say thanks again to Vitaly for sponsoring this episode. If you do decide to check them out at vitaly.io/churnfm, please make sure to let them know that I sent you because tracking podcast advertising is traditionally very difficult. And I wanna make sure that we deliver value on this campaign so that we can retain them as our sponsors. Thanks again for listening and we'll see you next week.